Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Oct 5, 2020

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Here's what you need to know...

  • Credit scores are used by many car insurance companies when determining coverage rates
  • A good credit score may qualify you for a special discount that helps you to save money on your premium
  • Companies including Nationwide and Progressive offer good credit discounts
  • Drivers should be aware of their credit scores and should actively take steps to improve their credit rating if they have lower scores

As a driver, you may be aware that car insurance companies review a wide range of factors when determining your insurance premium rate. These factors may include your driving history, age, gender, and more.

However, you may not be aware that many providers also regularly review your credit rating to determine your insurance pricing.

While some insurance providers look heavily at your overall credit score, others delve deeper into various specific factors in your website. They may create their own credit rating for you based on their review of these items.

Each car insurance company may analyze your credit differently and may place a different level of weight on it.

Some companies offer a good credit discount that can help you to save money on your coverage regularly. Compare quotes for car insurance and see which companies have the best premiums and discounts to offer you. Enter your ZIP code above to started today

Table of Contents

How Your Credit Scores Affect the Cost of Car Insurance

Credit scores can actually have a positive or negative effect on your premium amount, and you should spend time learning about these possible effects if you want to save money on auto insurance.

Credit scores can affect the insurance rate that you pay as well as the possibility that you qualify for a good credit discount through some providers.

With this in mind, you can see that it is important for drivers who want to save money on car insurance to know what your credit scores are and to actively improve them as needed.

Understanding Negative Events on Your Credit Rating

Insurance companies often do not look solely at your credit score when determining your car insurance rate, and instead, they generate their own score for you. They may look at various credit factors such as:

  • How many accounts you have with outstanding balances
  • Your payment history
  • Collections accounts
  • The amount of your outstanding balances

You may be hard-pressed to determine exactly how each provider analyzes these and other relevant factors on your credit report. The providers typically will not provide you with their exact algorithm.

However, because you know that the factors are being analyzed in some way, it makes sense to focus on improving your credit rating if you want to save money on car insurance.

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Using a Good Credit Discount

Good credit scores do more than just qualify you for a great car insurance rate. They also can qualify you for an additional good credit discount to help you save money on your insurance premium, which is available through select providers.

The qualification for this discount varies by provider, and you can research these requirements online or by calling providers directly.

When you understand how the insurance companies qualify drivers for a good credit discount, you may be able to more easily determine which providers to contact for a new car insurance quote today.

Learning How to Improve Your Credit Rating

If your credit rating is lower than it could be, there is a good chance that your insurance rates may be lower if you take steps to improve your credit history.

You can review a free copy of your credit report once per year, and you can easily request the report online through the primary credit bureaus.

Rather than focus on your credit scores, look at the derogatory items on the report that may be causing the lower scores. 

When you focus your attention on improving these factors, you may be able to enjoy lower car insurance rates and even qualify for a good credit discount in the future.

For example, if you want to qualify for better rates and a good credit discount, consider setting up automated bill payments so that all of your bills are paid on time and in full each month. You may also create and fund an emergency savings account.

These funds can be used to pay your bills on time if you have a cash shortage one month.

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How to Find a Provider That Offers a Good Credit Discount

While each insurance company that you may contact for a new rate quote will review your credit history in different ways, only some will offer a good credit discount that can help you to save more money on your premium.

Many providers publish a list of their discounts online, and you may even be able to see the exact qualifications for the good credit discount online. If not, you may need to call the provider to determine if you would meet their qualifications for a good credit discount.

Shopping online for discounts and quotes is generally a convenient and fast method to use.

Finding Other Money-Saving Discounts

A good credit discount is only one of several types of auto insurance discounts that you may qualify for.

Regardless of whether or not you qualify for this discount, you should consider looking for a provider that offers you the best rates and maximum savings through various discounts.

Some of the other discounts that different providers may offer to you include:

Understanding the Importance of Your Insurance Company’s Financial Strength

While insurance companies may look at your credit scores in part to determine your financial strength, you also need to be concerned about an insurance company’s financial strength.

Various rating agencies online publish data regarding the financial strength of different car insurance companies.

You can easily research the strength of specific companies that you are thinking about contacting to ensure that you only reach out to the most financially secure companies for a quote.

The Importance of Comparing Rates Periodically

Auto insurance rates fluctuate periodically, and the factors that are analyzed to determine your rates, such as your credit scores, also fluctuate. In fact, your credit scores may fluctuate significantly over the course of even one month.

Because your credit scores are reviewed upon each renewal, you should consider shopping around periodically for better car insurance rates and taking advantage of the good credit discount for savings when possible.

Shop around today for free. Enter your ZIP code into our free comparison tool below and find the insurance company that is right for you.